Do you need a 320 acre manufacturing facility in the Midwestern United States, but you just hate to pay property taxes? Well, you’re in luck. Oakland County (MI) has approved a 100% tax abatement for the recently closed Ford Wixom plant. For up to 15 years. one. hundred. percent. no. property. taxes.

Now, generally, I’m a fan of anything that will reduce taxes. As Richard Teather wrote for the Mises Institute a few weeks back:

… Game theory suggests that if the low-tax countries successfully attract international investment then other governments will respond, leading to a competitive spiral of tax reductions as they all compete for mobile capital….

But Brian Dickerson of the Detroit Free press argues that the tax burden will fall unequally on the citizens, while the big businesses stand to gain the most from the public goods – roads, infrastructure, police & fire departments, etc. – in a free society, so long as we assume that a tax burden will exist, and that it provides desireable public goods, how can we exempt the wealthiest among us. I’d argue that if this type of measure keeps you gainfully employed, locally, and without much retraining or strain on your pocket book, that you don’t have a whole lot of room to complain.
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Dickerson’s other point of contention is with Oakland County executive, L.Brooks Patterson, who’s assertion is that this parcel is a particularly hot property. Asks Dickerson: If the property is really such a desireable plot of land, then “why do lawmakers think that only massive tax breaks will prevent the site from going fallow?” I tend to think that Dickerson is putting words in Patterson’s mouth – Maybe it is a hot property only because of the tax abatement, or maybe it is a hot property and businesses will bid for it anyway? Now, if it’s hot because of the tax abatement, there can be no cause for concern. We expect a tax free parcel to be of interest to investors. But what if it’s particularly desireable anyways? What would be the purpose of such a massive tax abatement?

I’d start by examining “those things which are not seen.”

Let’s start by recognizing that businesses that don’t have to pay taxes spend more money on A)employees, B)dividends, C)domestic capital investment. Just as US corporations move operations overseas for marginal savings with regard to labor, many corporations will likewise move their operations to a locale where there was no property tax levied upon their investment. Foreign corporations will see the United States as a captial investment tax-haven.
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Carry it a little further: Imagine some sort of Business-topia, where large firms don’t pay property taxes, which in turn decreases (sometimes siginficantly) the fixed capital cost of doing business in this country. Which will attract more businesses, ideally creating more jobs, strengthening our economy and increasing employment. But, Through (de)regulation of this kind, the tendency of business investment will be skewed more towards large business, which can improve on economies of scale not available to small & medium sized businesses.

For comparison, much of the “New Center” area in Downtown Detroit has been the beneficiary of 50% tax abatements, for periods of varying lengths, and these abatements have done wonders in terms of new development, especially in the residential arena. Massive tax abatements might not be the only thing that will prevent the site from laying vacant, but I can’t see how it could hurt.